How to Make Business Model Innovation Happen

One of many good reasons for you to focus on your business model is that companies focusing on Business Model Innovation outperform their industry peers in terms of operating margin and total shareholder return. In this in depth article Marc Sniukas provides you with a framework to describe your business model in three easy steps; a process to start and drive Business Model Innovation within your company and an overview of tools and how they can be used in Business Model Innovation.

Business Model Innovation is about transforming key elements of your business or inventing completely new ways of doing business. A first key element is to describe your actual business model along the three main questions of who your customer is, what are you offering and how are you doing this. To drive Business Model Innovation in established companies you will need a clear process, with clear tasks and a dedicated team driving the efforts. Tools can help, but they are not enough. The process and the allocation of resources are crucial. This manual will outline key questions to describe your business model and show how a five step process of setting the stage, discovery, development, conceptualization and commercialization can be used to drive Business Model Innovation within your organization.

Why business model innovation matters

While the concept of “business model” has emerged during the new economy boom of the mid-1990s (e.g. Demil and Lecocq 2010; Leavy 2010; Magretta 2002; McGrath 2010; Teece 2010; Zott et al. 2010), it has since evolved past its original domain of e-commerce to become a central element of many companies’ strategies.

Here are some examples on why business model innovation matters:

  • Companies focusing on Business Model Innovation outperform their industry peers in terms of operating margin and Total Shareholder Return.
  • Business Model Innovation is the main driver of competitive advantage of companies like Southwest Airlines, Amazon, ArcelorMittal, or Apple;
  • New business models have been key to commercializing many new technologies;
  • Depending of the life cycle of your product, Business Model Innovation might be the only hope you have.

This is what you can expect from this guide

Despite the importance of Business Model Innovation, and the obvious benefits to be gained from it, established companies still struggle to make it happen. This IM in-depth article will provide you with:

  • A framework to describe your business model in three easy steps;
  • A process to start and drive Business Model Innovation within your company;
  • An overview of tools and how they can be used in Business Model Innovation;
  • Practical advice on how to get started on a low scale.

About the author


Marc Sniukas is a principal at Doujak Corporate Development, where he consults to executive teams on issues of strategy, innovation, strategic renewal and organizational transformation across a wide range of industries. He has worked with major corporations in Europe, the US, Canada, Latin America, Saudi Arabia, the UAE, Turkey, China and South Africa.

Besides his corporate work, he has also run courses at leading business schools including Stanford’s Graduate School of Business, the Boston University School of Management, and the European Business School London and he is currently researching Business Model Innovation as part of Manchester Business School’s doctoral program. His mission is to help organizations make strategic innovation for growth and renewal happen.

  • Paul Hobcraft

    Marc,

    A well structured document that I feel many would find valuable but I’m a little surprised that the evolution of the Business model from the work of Alexander Osterwalder in his arguably ground breaking research and studies that produced the Business Model Canvas does not get evaluated by you here or referred too, within your paper, apart from recommended tools or reading. That is an oversight or deliberate?

    Equally where the Business model has galvanized is within the Start up and Entrepreneur spaces and the work feeding partly off Alexanders BM Canvas, from the likes of Steve Blank in the customer end and in advancing Education and Students entering the economy with viable Business models as well as the continued linkage into Eric Ries and his ‘pivot’ explanations and the emergence of the lean canvas as well.

    Surely they would have given additional value to your document to complete an evolving picture that has a lot of interest behind it.

  • http://twitter.com/sniukas Marc Sniukas

    Paul,

    thanks a lot for your comments.

    As the article focuses on Business Model Innovation within established companies, the research mentioned does rather come from these areas and less so from start up and entrepreneurship research.

    I’m sure the work you mention can have valuable insights and I encourage everyone to take the ideas (no matter where they come from), build upon them, reshuffle them and use all that helps to drive business model innovation within established organizations and start ups alike.

    I didn’t want to favor one tool over another here, as I think that all of them are great and it really depends a lot on your company and circumstances to decide which is best.

    We’ve worked with the canvas and some companies love it, some think it’s too complex, some think it’s too simplistic.

    So I’d like to leave it to the reader to make an informed decision as to what tool to use based on the principles underlying all of them.

    Alexander, Eric and Steve have published great books outlining their theories and tools, and a lot has been said, written and posted about them, and I feel there’s little I could add to what they have to say about their thinking.

    We shouldn’t forget the other authors, researchers and practitioners (like Amit and Zott, Teece, Johnson, etc.) that also have valuable insights to business model innovation.

  • cesarmalacon

    Hi Paul. I agree with and like most of your own material undoubtedly  always valuable, but in this occasion I am in a bit different path. 
    First, I think this document focuses on ‘incumbents’ so the entrepreneurship thing is left apart deliberately. 

    On the other case, you said you were surprised by the fact that BMC of AO and YP is not evaluated here, I want to say that I am actually grateful with that. Personally I like the BMC because as I have said before -referring to one of your posts actually- is a great tool to pull the different thinking of diverse members of a company together and visually denote clear objectives and ‘to do’s’ for everyone, but when it is about talking about business model innovation I think the BMC gets short. I asked myself this question when reading your comment: Why would anybody interesting in ‘making business model innovation happen’ want to read about the AO’s Canvas when this document poses all the right questions to ask? when the document is based in rigorous research such as Amit & Zott, Magretta, Leavy and others and on top of that includes real business cases clarifying the concepts posed? 

    I think with documents such as this one Marc wrote, visual designed frameworks are much more a supportive tool providing not as much relevance as the reasoning proposed by Marc does. I think this document doesn’t need the BMC, or any.

    And just for reference, if Alexander Osterwalder must be mentioned here, so others deserve the right, such as Zimmerman who since 2001 published a framework with some of the blocks included in Alex’s Canvas, or Pateli who in 2003 came out with a really similar framework to the BMC and many others. The-Business-Model-Database’s Anders Sundelin prepared a document with a superb timeline (I’m sure you have it) with all this frameworks about BMI.

    Regarding the Business Model Canvas, I applaud long and loud the “commercial product” AO launched. He gave a marketing lesson similar to what Mary Kay did selling the illusion of beauty with her products, for me, the BMC sells the illusion of deep business acumen and knowledge with a rectangle to anyone. (I can tell you about some examples of this illusions).
    Rephrasing the tittle of this document, for business models innovation to happen, much more is needed.
    I know we all agree on that.
    BMC helps, but wouldn’t make any difference without other inputs needed. -NOTE, I’m not saying AO is an illusion, He is brilliant in business, management and mostly in Marketing letting alone speaking.  

    Regards,

    Talk to you soon!
    bye
    Cesar

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  • http://www.lyonessscamreview.com/ Jeanette Hayworth

    I never thought much about business model innovation. I think now I have to get back and to review my business model again. I have not seen a favorable profit margin for some time, and I think it has got to do with my business model. Lowering costs has always been my main focus, but I should really be focusing on getting the right market.

  • http://www.lyonessscamreview.com/ Jeanette Hayworth

    I think now I have to get back and to review my business model again. I have not seen a favourable profit margin for some time, and I think it has got to do with my business model. Lowering costs has always been my main focus, but I should really be focusing on getting the right market.

  • Pingback: Business model : innover pour bouleverser un ordre établi « Analyse « Business-analytics-info.fr

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